What Is Credit Card Churning? (2024)

When you first get started in the world of travel rewards, you may find all sorts of terms that you don’t understand. One such term that comes up again and again, both online and in person, is credit card churning.

Credit card churning isn’t just tossing a bunch of credit cards into a big vat and stirring them around. That wouldn’t make any sense, even though that is what it sounds like. So what does credit card churning really mean?

Let’s take a look.

What Is Credit Card Churning?

Credit card churning is the process of opening cards for the sole purpose of earning welcome bonuses or other benefits. Usually, it involves closing cards after the bonus posts to your account and before the next annual fee is charged. This can obviously be very lucrative if done right, but you should be aware, a pattern of opening and closing cards quickly is often a red flag for card issuers.

The usage of the term has evolved over time, but the following scenarios are considered credit card churning currently.

Multiples of the Same Cards

Originally, the term credit card churning was used to refer to applying for the same type of credit card over and over again. This is done primarily to collect a large welcome bonus available on a card, then cancel the card once that bonus has been earned.

The process involves applying for a credit card, getting approved, meeting a minimum spend within a set amount of time, earning a large welcome bonus, and canceling the card before the next annual fee is due. Once this is complete, the process is simply repeated again and again, hence the term churning.

Multiple Card Applications at Once

As time went on and people wanted to earn even more types of rewards, credit card churning began to take on a second meaning. This second meaning is also a repetitive process, just done on a broader scale.

Instead of getting multiples of the same card, credit card churning can also mean applying for multiple new credit cards at the same time, and repeating that multi-application process every few months. In miles-and-points parlance this is also known as an “App-o-rama”.

When credit card churning in this way, an applicant applies for a batch of credit cards (usually three or more) on the same day. Then, three months later, the applicant applies for another batch of different cards. This is repeated as long as there are available new cards and the applicant can continue to meet the minimum spending required to earn the bonus on each card.

Credit card churning like this allows an individual to earn several large welcome bonuses every few months and makes it possible to quickly build up huge amounts of miles, points and cash back.

How To Protect Your Credit

Each time you apply for a credit card, it affects your credit score in multiple ways. First of all, adding a new hard inquiry to your credit report can cause your credit score to drop a few points. Second, if you are approved, the new credit that you are issued will increase your total available credit, therefore changing your credit utilization and increasing your score. Finally, the new card account you are approved for will decrease your average age of accounts, which will in turn impact your score.

Overall, taking all of these factors into account, your credit score is likely to drop slightly with each card you apply for. It is important to know this and to plan accordingly, especially if you are hoping to get a home mortgage, mortgage refinance or auto loan in the near future.

How Does Churning Affect Your Credit?

Remember, your credit score is only part of your financial profile. Credit card churning may not impact your score by more than a few points, but it can significantly impact how a current or future card issuer perceives you as a customer.

Your credit is one of your most important assets and maintaining a good credit score is one of the best things you can do to help make your financial life easier down the road. Be sure to think through both the positives and negatives before taking any action that will affect your credit.

Bank Rules Preventing Churning

As you can imagine, the banks that issue credit cards aren’t the biggest fans of credit card churning. To them, churning is somewhat of a dirty word. The most profitable credit card customers get a card, don’t pay attention to the extra benefits, carry a balance and pay interest and annual fees for many years.

When churning credit cards, the goal is often the exact opposite. You get a new card, maximize as many benefits as possible, pay off your balance each month, cancel before the annual fee is due again and move on to the next card. Since credit card churners don’t pay any interest and minimal fees, they are some of the bank’s least profitable customers. The banks still get the transaction (or swipe) fees when you make charges, but depending on how often the card is used after earning the welcome bonus, this may not add up to much.

As a result, banks have come up with several ways to discourage credit card churning. Advertisers are encouraged not to talk about the topic. Some sites that have affiliate relationships with advertisers may even be discouraged from using churning language when discussing specific products.

On the consumer side of things, banks have instituted many rules over the years to prevent credit card churning in both of its forms. It is a good idea to be familiar with these rules before applying for a new card, even if you are not credit card churning. You don’t want to waste an application and the credit inquiry it requires on a card you won’t be approved for.

Preventing the Same Cards

Years ago, it used to be possible to get a new credit card of the same type as often as once every month or two. For some cards, you could actually get approved for multiples of the same card on the same day, opening three or more accounts at once. Those days have passed. In most cases, banks have now put rules in place to prevent people from doing this.

Here are a few examples of these rules:

• American Express Lifetime Limitation: On a majority of its credit card applications, Amex has added language that states that an applicant will not be approved to earn a welcome bonus more than once in their lifetime for a particular card type.
• Chase Sapphire 48-Month Rule: Chase has a rule on the applications for its Sapphire family of cards that says an applicant can’t earn a welcome bonus on any of the Sapphire cards until 48 months has passed from the last bonus earned on a Sapphire card.
• Citi 24-Month Rule: Many of the cards Citi offers now have a rule in the application that states that you can’t get a new card if you have opened or closed a credit card in the same family of cards within the last 24 months.

Too Many Applications

Banks have also added rules, some written out and some unwritten, to limit the number of cards you can get approved for in certain lengths of time. These limits can apply to new cards from that particular bank or they can also apply to any new cards from any bank.

Here are a some examples of these rules:

• Chase 5/24 Rule: If you’ve opened 5 or more credit cards with any issuer within the past 24 months, you will not be approved for a new credit card with Chase.
• American Express 5/90 Rule: You can hold five Amex card’s at a time, only receive two new cards in a 90 day time period.
• Citi 8/65/95 Rule: For personal cards, you can apply for no more than one new Citi credit card every 8 days and no more than two new cards within a 65 day window. For business cards, you can only apply for only one new card every 95 days.

Targeted Offers

Banks often send out targeted offers for credit cards to potential customers. These offers can come through the mail, through email, through groups you belong to or through a particular site you visit. Sometimes, these targeted offers do not include the limiting language that the standard application for that product has.

A targeted offer may come with a higher welcome bonus than the standard offer for a card or it may allow you to get a card for which you would otherwise be ineligible. With American Express, for example, targeted offers often do not include the once per lifetime limitation. If you are lucky enough to be sent one of these offers, you can apply for and be approved for a card even if you have already had it.

It is important to be careful with targeted offers though. You need to make sure that you are the individual or are part of the group that is being targeted. Banks may not approve you for a card if you try to use someone else’s targeted offer. Additionally, banks may cancel your account and confiscate (also known as claw-back) your points if they determine you applied for an offer that wasn’t targeted to you.

In extreme cases, banks or loyalty programs have been known to shut down all of the accounts for certain individuals. Within the last year, for example, American Airlines shut down the frequent flyer accounts of a large number of their members who had applied for multiple Citi AAdvantage cards over the past few years. They gave no notice, didn’t allow for any explanation, closed accounts, and confiscated miles. Some customers lost hundreds of thousands of miles they had earned, even the miles they earned from flying.

Bottom Line

The term credit card churning has been used in the travel rewards community for many years, even if its meaning has changed over time. At this point, credit card churning can have one of two meanings and you will hear it used regularly in either way.

In one respect, credit card churning can mean to apply for the same exact credit card over and over again. In another, it can mean to apply for a group of different credit cards every few months and cycle through them after earning the welcome bonuses.

Whichever way you hear the term used, the purpose of credit card churning is essentially the same: to earn as many miles, points or cash back bonuses as possible, and to do it as quickly as you can.

As banks have instituted rules designed to restrict or block credit card churning in both of its forms, applicants have had to slow down their churning and rely on things like targeted offers and brand new cards to keep earning bonuses.

You also need to remember that you don’t own your miles and points; the banks do. Banks can revoke your miles and points at their sole discretion if they decide, rightly or wrongly, that you haven’t played by the rules.

Credit card churning is still possible today, but applicants have to be much more strategic about the cards they apply for and when they do those applications if they want to keep churning in the years to come.

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